Getting out of debt is not an easy thing to do, but there are a few different ways that you can go about it. One of the more attractive sounding ways is free credit card consolidation, but is it the right method for you? While it sounds like a simple solution, there are some things that you need to be aware of before choosing it.
The main thing to remember is that credit card companies don’t really care about you as a person, but they do care about getting as much money from you as possible. Their business is making money. However, their profit motive alone isn’t a reason not to take advantage of free credit card consolidation if it’s offered to you; instead, it’s good to keep in mind as you read over the fine print.
You can be sure that any credit card company offering free consolidation is going to make their money one way or another. Here are just a few of the tricks they may try to use:
1. Teaser rates. 10%, 5%, 0%! Those rates are pretty appealing if you are currently paying 20% to 30% interest. You could save a lot of money by consolidating all of your high-interest debt to a low-interest credit card. Be sure to read the fine print to see how long the low rate lasts and what it applies to. The lowest rates may only apply to new purchases, or they may apply to balance transfers; the only way to know for sure is by reading all of the terms and conditions of the offer.
2. Hidden fees. While it may be technically true that you are being offered “free credit card consolidation”, you may end up paying other fees; for example, some cards will charge an annual fee just for having their card.
3. Limitations. Another thing to watch out for is limits on consolidation. If you will be using another credit card for your consolidation, then you need to see how much you are allowed to transfer. Some cards will offer free balance transfers, but only for a certain amount, and anything over that amount will then be charged at a higher rate.
Even if the credit card company isn’t using any of these things to entice you, you need to ask yourself if consolidation is right for you. Consolidation sounds like a great deal: you get to move all of your high-interest debt to something with lower interest, and save a bundle of money in the process. It can and does work, but not for everybody. The problem that some people run into is that they suddenly have more money to spend, and they also free up more credit. This can lead the financially undisciplined to get into deeper debt. However, if you can handle your money and want a good deal, then free credit card consolidation is an excellent solution. Look at a few offers and see which ones have the best terms and will save you the most money.